February 5th, 2010
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Flight to quality bid in Treasuries
Although the non-farm payrolls data was reported to be in line with expectations, it was an action packed end to the trading week. The day's economic news leaned lower in Treasuries but a volatile stock session and sovereign debt risk issues prompted some flight to quality buying.
According to the government, the U.S. economy lost 20,000 private sector jobs last month and the unemployment rate fell to 9.7%. Like this pro football player says...what is everyone crying about? http://clicks.aweber.com/y/ct/?l=6K1iZ&m=1dgl_XuxoKigzm&b=kymjCDG_jgpPw44YOFVa3A
However, most believe that the drop in the unemployment rate can be attributed to a shrinking job pool as opposed to actual improvement. As we all know, the stats don't account for those that have given up on finding a job or are "underemployed". Accordingly, the pain being felt throughout the economy is worse than what is shown on paper.
Next week's calendar will be much less active and this leaves traders to focus on the upcoming auctions and testimony from Fed Chair Ben Bernanke. Don't forget that $40 billion in 3-year notes, $25 billion in 10-year notes and $16 billion in 30-year bonds will be auctioned...and this is a considerable amount of supply for the market to absorb.
In yesterday's newsletter, we were looking for the bonds to rally to 120 and the 10-year notes to see 118'25 and today we got it (almost). The note seems to be getting near-term toppy but the bond never reached our objective and may have a little room to run on the upside before a temporary reversal can occur.
Our weekly charts are suggesting that the note could reach a bit over 121 before reaching a seasonal peak in March. Similarly, the T-bonds could see 123 again.
* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data. However, market analysis and commentary does. Charts provided by Track 'n Trade, Gecko software.
**Seasonality is already be factored into current prices, any references to such does not indicate future market action.
Treasury Bond and Note Option Trading Recommendations
**There is unlimited risk in naked option selling.
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Treasury Bond and Note Futures Trading Recommendations
**There is unlimited risk in trading futures.
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Carley Garner
Senior Analyst / Commodity Broker
DeCarley Trading
1-866-790-TRADE
Local : 702-947-0701
*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.
There is substantial risk of loss in trading futures and options.
Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.
